Navigating the path to dental practice ownership is a journey that blends rewarding triumphs and challenging trials. It requires careful evaluation of financial potential, personal preparedness, and the development of resilience. This article will explore the multifaceted aspects of transitioning from being an associate to owning your own dental clinic. Drawing from real-life case studies, we will reflect on the rewards and challenges of practice ownership. By addressing financial considerations, personal growth, and the importance of resilience, dentists – new and seasoned – can gain valuable insights and guidance as they contemplate this significant step in their careers.
Assessing Financial Potential and Commitments.
Financial considerations are pivotal in deciding to own a dental practice. It is important to understand the economic advantages that practice ownership can offer, such as the potential for robust growth and higher earnings. From a financial perspective, the appeal of owning a dental practice lies in the potential for robust growth. The experiences we’ve gathered from Ontario, for instance, indicate that the average dental office generates more than $800,000 in revenue, with profits approximating $265,000 – a 33% profit margin. At Valeo, we’ve even worked with individual practices billing as high as five to seven million dollars a year, illustrating the unlimited earning potential that successful dental practice ownership can offer.
Owning a practice also entails financial commitments. These include property costs, staffing, insurance, taxes, and marketing expenses. Dentists must carefully evaluate these financial aspects and develop a solid financial plan to mitigate risks and ensure long-term sustainability. It is crucial to factor in interest rates and economic conditions, as fluctuations in these areas can impact debt servicing and overall financial stability. As the prime interest rate in Canada reached an exceeding historical average, debt servicing can constitute a substantial portion of the overhead. This reality has become evident through the challenges some of our clients have faced in 2022-23.
Purchasing a clinic at an inflated multiple or overpaying based on an aggressive appraised value can have detrimental consequences from the outset, as excessive debt servicing can undermine all your hard work. Drawing into a simple parallel example, being a shareholder of Apple at $130 per share is not the same as owning it at $300. While the debate here isn’t on Apple’s appeal as a company – no one is debating its prowess – but the price at which you own it makes a significant difference, especially when you borrowed money to purchase those shares.
The Appeal of Autonomy and Personalized Work Environment.
One of the most enticing aspects of practice ownership is the autonomy it provides. As an owner, dentists can shape their ideal work environment, allowing them to align their clinic with their values and philosophies. They can control team selection, office policies, service offerings, and working hours. By customizing their practice, dentists can foster a supportive and collaborative work environment where team members share a common goal of delivering excellent dental care. This level of autonomy and personalization can lead to higher job satisfaction and a stronger connection to the practice. Your workplace is where you spend most of your waking hours, typically 60-70% of your time. Having an office that aligns with your preferences and reflects your individuality is invaluable and cannot be quantified by a simple valuation.
Overcoming Challenges and Developing Resilience.
The journey to practice ownership has its challenges. Dentists must be prepared to navigate obstacles and develop resilience along the way. The steep learning curve in the early years of practice ownership is a common challenge. While dental schools provide clinical training, the business aspects of running a practice are often not covered in depth, if at all. Dentists must be prepared to learn and adapt quickly to the business.
I have collaborated with hundreds of dentists, including other medical professionals, and noted that challenges in these areas are more common than you might think. In any given year, out of every 100 dentists who reached out to me, around 40 contacted me due to unforeseen operational challenges and 20 for staffing issues they could not resolve. Approximately ten reached out due to financial distress, another ten due to partnership disputes, and five are exploring potential exit strategies or have given up the idea of ownership. Interestingly, only about 10 out of 100 would call to inquire about capital investment, expansion, or growth opportunities – topics that I would refer to as “The Happy Flow.”
This pattern may suggest a universal human tendency – we often reach out for professional advice only when we’re cornered with no other options. Or, perhaps, it may indicate that the truth of the ownership journey has more bumps in the road than one might initially envision, despite the promise of financial growth and the allure of professional independence. So, remember, the journey is filled with big hurdles, while small victories and achievements are hardly noticeable.
Despite these hurdles, I firmly believe the journey to ownership can be rewarding. Having spent over a decade in this industry, I’ve seen this manifest in the experiences of many healthcare professionals I’ve partnered with. Seeking advice, taking advantage of mentorship opportunities, and considering partnerships can be effective strategies to mitigate these challenges. A collaborative approach allows more focus on dentistry while reducing risks and promoting the successful growth of the business.
Mental Preparation and Adopting a Stoic Mindset.
Business ownership requires mental preparation and adopting a resilient mindset. Dentists should be aware of the potential setbacks and challenges and mentally prepare themselves to face them. A stoic mindset can be beneficial in maintaining composure and focus during difficult times. Resilience encompasses self-awareness, discipline, and comfort with uncertainty. Dentists should acknowledge their ego while ensuring it doesn’t dominate their decision-making process. Remaining open to feedback and course corrections is crucial in a constantly evolving healthcare industry.
Financial prudence is also integral in developing resilience. Dentists should live within their means, engage wealth managers for financial planning, and maintain a lean business model to weather the inevitable ups and downs.
Building mental resilience can be daunting, but it is essential for the entrepreneurial journey. Dentists should perceive failures as stepping stones and challenges as opportunities for growth. Moments of self-doubt, anxiety, and fear are natural parts of the journey, and we should stay focused on their initial motivations and objectives to stay motivated.
Finally, prepare yourself for uncertainty, an inherent part of the entrepreneurial journey.
The decision to start your dental practice is significant and should be carefully considered. Before leaping, ask yourself these important questions: Are you financially prepared for the commitments and risks? Do you value the autonomy and freedom to shape your ideal work environment? Are you ready to overcome challenges outside of clinical expertise? And are you mentally prepared for the journey ahead and ready to develop mental resilience to the uncertainty to come?
You can embark on the path to practice ownership with confidence. Despite the challenges, the rewards can be immense for those ready to face them. Ownership can bring fulfillment both financially and personally. So, start this journey with resilience, a positive mindset, and the readiness to solve different puzzles. Enjoy each milestone along the way.
Good luck on your entrepreneurial journey!
About the Author
Ron Fung, MBA, has enjoyed a rewarding career spanning over 25 years in alternative investments and management consulting. As a Senior Executive of Corporate Strategy at EY-Parthenon, he advises Fortune 500 companies, DSOs, and private equity clients on all strategic matters. He previously served as the Managing Partner of Valeo & Co, specializing in healthcare investments. Ron is well known for his innovative strategies that enable businesses to thrive in the intensely competitive healthcare sector. To connect with Ron, visit his LinkedIn profile: linkedin.com/in/ronaldfung